China's Manufacturing Sector Grew

China's Manufacturing Sector Grew

over 3 years ago2 mins

Results of a private survey out on Tuesday showed China’s manufacturing sector ran like a well-oiled machine in August, growing at its fastest pace in nearly a decade 🇨🇳

What does this mean?

Quick, find some wood to knock on: the data – which was better than economists had been forecasting – suggests that the world’s second-biggest economy is bouncing back. And since improving exports played a big part in just how positive the data was, it’s raised hopes that China’s trading partners are starting to see a recovery too 🤞 There was some evidence for that in similar US data out on Tuesday: it showed activity in the country’s manufacturing sector grew for the third straight month and at its fastest pace since January 2019.

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Why should I care?

The promising data out of both countries helped push US stocks to new record highs on Tuesday. But the same can’t be said for the US dollar, which just hit a two-year low versus other currencies 💵 As for why, take your pick: it could be because of the economic uncertainty around the pandemic, the upcoming election, or the next round of economy-boosting aid measures that’s stuck in limbo. Still, at least gold and oil might benefit: demand for the commodities is expected to climb as they become cheaper in other currencies.

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Because of the way exchange rates work, if the US dollar is going down, some other currency must be going up relative to it. And look no further than the euro, which just hit its highest level in over two years versus the dollar 🇪🇺 One explanation could be Europe’s recent dip into deflation, meaning the price of goods is falling. And according to one popular economic model of determining exchange rates, a region with a lower inflation rate should see its currency go up in value versus a country with a higher inflation rate.

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